Supply Chain Management

Transcription

1 Overview of Logistics and Supply Chain Management Dr.T.A.S.Vijayaraghavan, XLRI Jamshedpur Supply Chain Management Supply Chain Management is now part of the business vocabulary. Impact of global marketplace drastically changed the landscape of business. Change was rapid and continuous in the 1990s. Doing business in the comfort zone was no longer synonymous with success Sorry for the clichés! Most books and lectures start with these and hence I too have to!! 1

2 Sources: plants vendors ports Regional Warehouses: stocking points Field Warehouses: stocking points Customers, demand centers sinks Supply Production/ purchase costs Inventory & warehousing costs Transportation costs Inventory & warehousing costs Transportation costs Competitive Advantage and Three C s CUSTOMERS Needs seeking benefits at acceptable prices Value Value COMPANY Assets & Utilization Cost Differentials COMPETITOR Assets & Utilization Success in market place is based around the triangular linkage of the Company, its Customers and its Competitorsthe Three C s. 2

3 Successful Companies either have a productivity advantage or they have a Value advantage or a combination of the two Productivity Advantage gives a lower cost profile and the Value Advantage gives the product or offering a differential plus over competitive offerings Supply Chain and Logistics Management can provide a multitude of ways to increase efficiency and productivity and hence contribute significantly to reduced unit costs Companies have focused upon service as a means of competitive advantage Logistics and Competitive Advantage Value Advantage Low High Service Leader Responsiveness Commodity Market Cost and Service Leader Cost Leader Efficiency Low High Productivity Advantage 3

4 Logistics in the Manufacturing Firm Profit 4% Logistics Cost 21% Profit Logistics Cost Marketing Cost Marketing Cost 27% Manufacturing Cost 48% Manufacturing Cost A Typical Supply Chain P&G or other manufacturer third party DC Supermarket Customer wants detergent and goes to Supermarket Plastic Producer XYZ Packaging Chemical manufacturer (e.g. Oil Company) Chemical manufacturer (e.g. Oil Company) Paper Manufacturer Timber Industry 4

5 Flows in a Supply Chain Information Product Funds Customer The Changing Business Landscape Five Driving Forces The Empowered Consumer Power Shift in the Supply Chain Liberalization Globalization Technology (I call them as Pancha Bhuthas of Business!) 5

6 Five Driving Forces First The Empowered Consumer Impact on logistics is more direct. Informed consumers have low tolerance for poor quality in products and services. Changing demographics commands 24/7 service. Increased customer service increases the importance of logistics and supply chains. Demand Management is tougher in supply chains!! This is what I call a challenge: Five Thousand people out there to manage the supply chain..and we two are holding the fort on the demand front 6

7 So.. Customer holds the fort in Supply Chains and it is a dynamic force So customer is the King or Queen and so effectiveness is emphasized all throughout I do appreciate your honesty in admitting to a weak supply chain management. But that still doesn t explain the one-and-a half-idly Five Driving Forces Second.Power Shift in the Supply Chain Power shift in the supply chain towards retailers and customers from Manufacturing 7

8 Five Driving Forces Power Shift in the Supply Chain Large retailers more demanding and commanding. Focus upon distribution costs Changing logistics and supply chain strategies resulted from shifts in the balance of economic power. But this can possibly cause something else in the supply chain!!!! The Dynamics of the Supply Chain Order Size Distributor Orders Retailer Orders Customer Demand Production Plan Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management,

9 What Supply Chain Gets... Bullwhip Effect. Who triggers that?..retailers!!!! Order Size Customer Demand Production Plan Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Time What Supply Chain Wants Volumes Production Plan Customer Demand Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management,

10 Five Driving Forces Third Liberalisation Changing economic controls empowered creativity and competition. Changes in transportation fewer or no economic controls over rates and services. Change in financial institutions blurred traditional differences and increased competition. Change in the communications industry also resulted in more competition. Changes in the utility industry allows more competition. Five Driving Forces Fourth.Globalization Global marketplace concept Global network sourcing, manufacturing, marketing and distribution Global alternatives have blossomed No geography --- access available to the world Supply chain challenges New supply sources 10

11 Five Driving Forces Fifth..Technology Information Age provides new and unrestricted access to the place aspect of business. My time, my place IT as an enabler with internet and satellite communications Result of reading an article on IBM s supply chain 1. Request for Quote 3. Purchase Order Buyer 16. Proof of Delivery 15. Import Documents Terminal at Destination Bank 4. P. O. Confirmation 7a. Manifest 13. Payment Order 14. Remittance Air Freight Surface Carriers 2. Quotation 7a. Manifest 7a. Manifest Bank 6. Ship Order / Instr. 12. Export Documents 5. Shipper Order/Instr. + Invoice Terminal at Origin Supplier 5. Shipper Order/Instr. + Invoice + Packing List Capture Freight Forwarder Gate Movement Terminal at Destination 11. Pre-alert/Arrival Notice 8. Gate-in/ Gate-out 10. Bay Plan 9. Bay Plan Ocean Carrier 7a. Ship Instr. Cycle 7b. Shipping Order Cycle (S/O, BoL) 8. Gate-out/ Gate-in Terminal at Origin Freight Forwarder Capture Gate Movement (Gate-out/in) IBM s Supply Chain is Complex, Extensive, Contains high value items and Controlled Technologies. 11

12 I tried a Google search about Supply Chain Management in the internet The result was Inventory Reverse auction Quick Response Service level Cash-to-Cash Supply chain Strategic Sourcing Agile Manufacturing Available to Promise Supply Management Bullwhip Logistics Warehousing TOC Value chain E-procurement Efficient Consumer Response Distribution E-commerce Quick Response Manufacturing E-supply chain ERP E-CRM CRM, SRM MRP Lean Manufacturing B2B, B2C Collaborative Commerce Integrated Logistics Management Postponement JIT Continuous Replenishment E-auctions EDLP Collaborative Planning Forecasting Replenishment DRP APS/APO Outsourcing/ Insourcing Flexible Manufacturing Vendor Managed Inventories 12

13 And.you all thought only the species called Professors can confuse you.!!!!!! (It s all outsourced now!) The term SCM is relatively new and first time appeared in 1982 In 1990 academics first described SCM from a theoretical standpoint to clarify the difference from more traditional approaches to managing the flow of materials and the associated information. 13

14 The initial usage of the term SCM emphasized a reduction in inventory both within and across firms but that initial perspective has been broadening. The term Logistics also has many interpretations. From some statements of SCM, it appeared that SCM is Logistics across inter-organizational boundaries We will discuss first about Logistics Management and later come to the discussion on Supply Chain Management 14